Bank of America expects shares of Yellow Cake Plc, a UK company that offers investors direct exposure to uranium price movements, to rise 55% over the next 12 months. Unlike traditional mining companies, Yellow Cake’s business model is “simple” and operates “without exploration, development, mining and processing risk”, according to the investment bank. The company, which trades as YCA on the London Stock Exchange, raises capital and uses it to purchase uranium at a predetermined price from Kazatomprom, the world’s largest uranium producer. The purchased uranium is then stored in secure facilities in Canada and France. YCA-GB 1Y line “We are bullish on YCA, which gives investors clean leverage on movements in the value of the underlying uranium,” Bank of America analysts led by Yuyang Zhang said in a statement. research note to clients on May 10. Yellow Cake’s stock value is closely tied to the price of uranium, as it revalues its holdings based on the current spot price. This means that if uranium prices increase, Yellow Cake’s stock value should also increase. The company attempts to buy more uranium when its shares are trading at a premium and to buy back shares when they are trading at a significant discount. This strategy allows the YCA to gain exposure to uranium at a price below the spot price of the commodity. Bank of America is also bullish on uranium, predicting its price to be $75 a pound in the third quarter of 2024. “We believe that nuclear energy and uranium have a role to play in solving the twin challenges of decarbonization and energy security,” the analysts added. With uranium production mainly concentrated in Kazakhstan and Canada, the bank expects supply constraints to continue, further supporting uranium prices. Uranium demand is expected to rise, especially in China, which plans to increase its nuclear capacity by 40% between 2021 and 2025 as part of its goal to become carbon neutral by 2060. According to the World Nuclear Association , China has 55 reactors and 23 reactors under construction and is expected to build 150 new reactors by 2035. However, the investment bank warned that the company is not immune to geopolitical and climate-related risks. offer despite Yellow Cake’s unique business model. Current economic sanctions against Russian companies could impact the global nuclear fuel market, as Russia holds a significant share of the world’s uranium conversion and enrichment capacity.
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Are you bullish on nuclear? This stock is directly exposed to uranium, according to the BoA
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